What is the purpose of a financial statement?

The purpose of a financial statement is to record financial activities. Financial statements serve as formal records that outline the financial position and performance of an individual or organization over a specific period. They include key components such as the balance sheet, income statement, and cash flow statement, which together provide a comprehensive view of financial health, enabling stakeholders to make informed decisions.

These statements summarize income, expenses, assets, and liabilities, giving insights into profitability and sustainability. They are essential for planning, budgeting, and evaluating financial performance, which helps in making strategic decisions about spending, saving, and investing.

Other options focus on various financial aspects, such as tax obligations or stock market trends, but those do not encapsulate the main role of financial statements themselves. The central function remains recording and presenting a clear picture of financial activities to stakeholders.